Contractor’s review of project risk may lead to a spend-earlier-to-save-later approach.
Costain has hired consultant KPMG to examine its risk management strategy in an attempt to avoid bidding for loss-making jobs.

KPMG was appointed late last year after Costain scrapped its internal audit department. As well as advising on the contractor’s risk/reward strategy, it will examine financial and operating controls and provide accountancy services.

Costain’s senior management team, which met last week to discuss progress, were asked to identify and analyse 85 risks that they faced on projects .

Chief executive John Armitt said: “We weighted the risks in terms of financial impact and the likelihood of them occurring. We have whittled it down to six key risks and we will be putting processes in place to safeguard against them.”

Armitt said the company could radically alter its approach to M&E contractors and assessment of ground risk. “We may decide we need to have increased resources to allow us to appoint M&E contractors much earlier in the construction process,” he said. “And because ground risk is one the biggest risks in construction, we may decide that we need to do more site investigation at the beginning of the process. It could well be that spending £500 000 on a soil investigation is worth it in order to avoid a major delay at a later date.” The review is part of Costain’s ongoing drive to increase margins.

KPMG’s duties include visits to many Costain sites and offices. The consultant’s chief representative will report directly to Costain group finance director, John Campbell.

  • Lars Johansson, managing director of Skanska UK, said the company would not rush into increasing its stake in Costain, adding that it was investigating how to develop its business interests in the UK.

Skanska owns 7.6% of Costain and has an option to buy up to 40% at a set price. The option expires in November. Speculation has mounted that Skanska will allow the option to expire and then buy the shares more cheaply at the market rate.

Troubled Malaysian contractor Intria, which owns 37% of Costain, said it wanted to sell its stake late last year. Intria is itself expected to be sold to Far Eastern firm MTD Capital.